Around this time last year, India was the only BRICS member that entered 2014 on a shaky ground with several uncertainties such as general election results, high inflation, currency volatility and the impact of an end of the US quantitative easing programme. If India, then, was seen with a bit of apprehension, it is the only member nation that stands out and looks set to take-off.

If Russia and Brazil— big commodity exporters — are struggling to cope with a sharp decline in the commodity prices, China’s export-led growth is on a declining path on the back of a slowdown in the developed world. However, in the case of India, softened crude oil prices, low inflation, expectation of a rate cut and hopes of policy reform in the upcoming Budget have all propped up the market to all time highs along with record FII inflows.

“India is the only BRIC nation and only emerging market (with GDP above $1 trillion) that is forecast to accelerate its GDP during 2014-18. It is likely to overtake Russia and then Brazil to be the second largest BRIC economy with a GDP near $3 trillion in 2018,” said Anand Shanbhag, head, research, Tata Capital Securities.

Following strong FII inflow of around Rs 97,055 crore ($16.1 billion) in Indian equities and a strong domestic investor participation, the calendar 2014 saw the Sensex rise by 30 per cent to close at 27,499. If markets rose on account of improved sentiments in 2014, experts say that in 2015, any rise in markets will follow policy initiatives of the government and earnings growth of companies.

Even the sustainability of this fund flow would to a large extent depend on how the government delivers on policy fronts. The year witnessed record FII inflows of over $42.3 billion (Rs 256,212 crore aggregate of debt and equity).

“We do not see any big risk in the markets, however, any further re-rating will depend on the policy initiatives and benefits that the economy and corporates accrue from low commodity prices. We expect the corporate earnings to grow between 16 and 18 per cent CAGR over the next two years,” said Harsha Upadhyaya, CIO, equities at Kotak Mahindra Mutual Fund.

There are some who feel the earnings growth will drive the markets. Nirmal Jain, chairman of IIFL who expects a return of anywhere between 20-30 per cent in 2015 said, “I expect significant rise in earnings. Not only because of the political stability but also because crude oil and commodity prices are softening and that being the raw material for most of the companies will improve their profit margins.”

If the government initially raised hope, the forthcoming Budget is being seen as an event where the finance minister may make several announcements that may turnout to be a critical indicator for both domestic and foreign investors as it may set the government’s economic agenda for the next three to four years.

On the global front, a strong third quarter GDP growth number of 5 per cent in the US has also lifted market sentiments. “While that may advance the Federal Reserve’s decision to hike interest rates, the markets are prepared for interest rate hike in US and it may not lead to any negative surprises or a knee jerk reaction,” said Upadhyaya.

So while the first trading session of the year started on a cautious note as the markets closed at 27,507 with a marginal gain of 0.03 per cent, the third quarter earnings season that kick-starts with Infosys results on Jan 9, interest rate cut if any from the RBI and policy decisions over the next couple of months will set the tone for the markets.